Aguia Resources (ASX: AGR) can breathe easier after winning a longstanding court battle, clearing the path to first production and cashflows in 2025 at its promising Três Estradas organic phosphate project in southern Brazil.
Back in June 2021, the Federal Public Prosecutors Office (FPPO), with the support of five civil associations, filed a public civil action seeking an emergency injunction to block a preliminary license that had been granted to the company.
The license, issued in 2019, allowed Aguia to process phosphate at Três Estradas and followed approval by the Rio Grande do Sul State environmental agency (FEPAM) of the company’s exhaustive three-year environmental impact assessment study.
In overruling the public prosecutor’s 2021 demand to have the 2019 licence annulled, the Federal Court in Bagé saw no basis for such action. It found the family ranchers, the primary complainants, should not be regarded as a “traditional community”and did not require “free, prior and informed consultation”, a requirement only applicable to traditional or indigenous groups.
Additionally, another complaint regarding the improper process of public meetings held prior to the licence award was also thrown out. The court found the hearings that were conducted - which included participants from nearby Dom Pedrito and Torquato Severo communities - met all legal standards and no further hearings are required for the environmental license to stand.
We already have the granted Installation and Environmental Licences. There is now no regulatory impediment to developing and commissioning the Tres Estrades rock phosphate mine in 2025, once the final approvals are received for the Operating Licence.
Aguia Resources Executive Chairman Warwick Grigor
The outcome puts Aguia’s Três Estradas project firmly back on track and the company can proceed with site preparations under existing environmental licenses.
Following the site preparations, the environmental authority is expected to issue a final operational license, enabling Aguia to start commercial mining operations. According to management, the final process could take between three and six months, with production slated to begin next year.
Três Estradas sits in the agricultural heartland of Rio Grande do Sul, Brazil, three hours’ drive from the capital, Porto Alegre and hosts a 105 million-tonne phosphate resource.
A 2023 bankable feasibility study (BFS) - backed by strong economics - concluded that by producing 300,000 tonnes per annum across an 18-year mine life, with capital expenditure of $26 million, the project would spit out $22 million a year in EBITDA. The payback period is anticipated to be just 2.9 years on the back of a significant 54.7 per cent internal rate of return.
The company told the market in July it was in advanced discussions to lease or buy an existing processing plant that sits about 100km from Três Estradas. The plant has been used for processing limestone, but with the exhaustion of a local supply of ore, the owners decided to sell.
Aguia has identified only minor upgrades required for it to repurpose the plant, including the addition of a rotary kiln and a bagging facility to the existing circuit.
Its organic phosphate product, Pampafos, is proving popular among local farmers after being exhaustively assessed on different crops around the world during the past four years. The company says the product is both more effective on crops and also substantially cheaper than chemical fertilisers.
Southern Brazil currently imports all its phosphate—mainly from Morocco—at around $400 per tonne under long-term contracts.
Aguia plans to sell Pampafos at $140 per tonne, a fraction of the current import prices. Even if Aguia decided to use the repurposed limestone plant and added $15 per tonne to compensate for trucking rates, the total cost of production would still be just $50 per tonne, potentially leaving plenty of profit margin.
With production covering 15 per cent of local demand, Aguia is confident it can easily sell its 300,000 tonnes per year within a 300km radius.
The company’s phosphate operations are also complemented by its Santa Barbara gold project and the polymetallic gold-copper-silver-zinc El Dovio play in Colombia which it picked up after successfully taking over Andean Mining earlier in the year.
The court decision to overturn the emergency injunction on Aguia’s license represents a critical milestone for the company, allowing it to push forward with a key project central to its strategic focus in Brazil. With all regulatory hurdles cleared, the company is positioned to move rapidly towards production and all important cashflows in the coming months.
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